Capitalogix

There is a growing disconnect in the stock market

On Thursday, the Nasdaq closed at its highest since March 2000.

On Friday, the S&P 500 Index traded at its intraday high (above 2120).

So, all is good ... right?  We should 'party like it's 1999'.

Some traders are noticing the disconnect between price and money flow in the US stock market.

 

via Business Insider.

A Bank of America/Merrill Lynch survey points out that US investors pulled $79B out of equities, year to date — including net outflows in 9 of the past 10 weeks — despite stock prices continuing to break new record highs.

As this imbalance grows, are we in danger of a correction?

What do you think?

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Here Are Some Links For Your Weekend Reading

Did you have fun filling out your taxes?

 

Here are some of the posts that caught my eye. Hope you find something interesting.

 

Lighter Links:

• The Expansive Qualities of Genius. (Evoking Genius)
• The Art of Performance Management and KPIs. (BCG Perspectives)
• Scientists Discovered How Much Sex Happy Couples Have Every Month. (Insider)
• Why We Love Back Rubs, Chili Peppers, and the Sex from “50 Shades”. (Salon)
• 20 of Steven Wright's Funniest Jokes. (MentalFloss)

 

Trading Links:

• Bull Session: How to De-Risk in a Bull Market. (Institutional Investor)
• AT&T dumped by Dow. Time to buy?  History suggests it's worth a look. (A.M.)
• Why American Airlines Just Landed In The S&P 500 Index. (ValueWalk)
• Hotels Near Record Occupancy Levels.  Is that a Good Sign for the Economy? (CalculatedRisk)
• Wall Street's Biggest Banks May Have To Make Good On $26 Billion In Oil Hedges. (ZeroHedge)

Asset Class Scoreboard Q1

A look back at the first quarter of 2015 shows that Managed Futures is relatively strong YTD.

Attain Capital posted this chart showing the comparative performance of eight asset classes.

via Attain Capital.

It will be interesting to see how the next three quarters play out.

Is Margin Debt Growth Something to Worry About - Or Celebrate?

Margin debt hit a record of almost $465 billion on the New York Stock Exchange in February, as investors borrowed more money than ever to buy into the post-financial-crisis bull market.

On one hand, that’s a good thing, for now, because it shows confidence. But, on the other hand, some traders believe that rapidly rising margin debt can be an early indicator of a market top.

This chart compares the percentage growth of Margin Debt to the S&P 500 Index going back to 1995, based on real (inflation-adjusted) data.

 

via D. Short in Advisor's Perspective.

 

Is it a coincidence that the "tops" align?

Margin debt grew at a rate comparable to the market from 1995 to late summer of 2000 before soaring into the stratosphere. The two synchronized in their rate of contraction in early 2001. But with recovery after the Tech Crash, margin debt gradually returned to a growth rate closer to its former self in the second half of the 1990s rather than the more restrained real growth of the S&P 500. But by September of 2006, margin again went ballistic. It finally peaked in the summer of 2007, about three months before the market.

So, where are we now?

Note that NYSE only releases margin statistics after a six-week delay; so it is tough to trade off them directly.

Thoughts from the Market Technicians Association Conference

I recently attended the Market Technicians Association's Annual Symposium in New York City.

It's always interesting for me to hang around with the leaders in our industry and to talk with other technical traders.

This picture is with Barry Ritholtz, the founder and Chief Investment Officer of RWM.

 

 

Barry did a great job on stage at the event. He also does a great job with his blog, The Big Picture.

Several people asked about the market sentiment expressed amongst the attendees. I think it's fair to say that most people were cautiously bullish. On one hand, that means that most people there recognize that the trend is up, and that the trend remains up until price proves otherwise.  On the other hand, most people were surprised that price has held up, this well, considering the political, economic, and social factors that can affect market prices.

On a different topic, algorithmic trading is still not mainstream. By that, I mean that currently neither algorithmic trading nor quantitative trading is part of the core practice or thought process of a group like this.

It reminds me of how most market participants considered technical analysis in the late 90s or early 2000's.

My sense is that these topics will grow in importance (to a group like the MTA) quickly as an increasing percentage of trades are based on this area of domain expertise and practice.

Stocks are the Most Expensive They've Ever Been

For what it is worth, the median stock in the S&P 500 is the most expensive it has even been.  Moreover, many valuation indicators are now at "the highest ever, except 2000". 

 

 

Perhaps when the economy is truly booming, that might make sense ... or be considered a good sign. 

At this point, it is more likely a good sign for short-sellers.

 

Traders understand that the prevailing trend has been up (and will remain that way, despite logic or argument, until price proves otherwise).

 

Related articles

What's Driving Performance During This Rally?

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The S&P 500 Is Too Expensive Buy Nasdaq Instead, Goldman Recommends

A Different Look at Things

This video was taken at the SXSW conference.  While it seems a little silly, the video illustrates an interesting point.

 

 

via TimeSlice Films, pioneers in multi-camera array imaging.

 

Perspective is important. 

Being able to see the 'invisible' makes the 'impossible' possible

 

via Flug.

New technology seems like magic until you understand how it is done.

Here Are Some Links For Your Weekend Reading

According to the President, the new three branches of government are ... me, myself, and I.

 

 

Here are some of the posts that caught my eye. Hope you find something interesting.

 

Lighter Links:

• The Power of Checklists. (Art of Manliness)
• The Most Thought Provoking Articles of the Year. (Brain Pickings)
• The Secret Meanings Behind 40 Brand Logos. (Marketing Land)
• The Science of Misheard Lyrics. (New Yorker)
• Why We Love Back Rubs, Chili Peppers, and the Sex from “50 Shades”. (Salon)

 

Trading Links:

• Saudi Arabia 'Engineered' Oil Crisis: Says Dallas Fed Chief. (Money)
• A Few Things To Know About Technical Analysis. (Stock Charts)
• Meet The Man Who Wants To Build The ESPN Of Finance. (HuffPost)
• A Netflix for Private Flights: A Members-Only Airline. (Fast Company)
• AT&T Dumped by Dow. Time to Buy? History suggests it's worth a look. (Markets)

9 Out Of 10 Big Pharma Companies Spent More On Marketing Than On R&D

This speaks for itself.

 

via DadaViz.

Of course, sometimes it can be said better.

MAP: Living Costs Around the World

This map shows the difference in living costs around the world using figures from the world's largest database of user contributed data about cities and countries worldwide.

The Consumer Price Index, used to determine the difference in the living costs between countries, takes into account the prices of groceries, transportation, restaurants and utilities.

 

 

There are many more charts with specific data by region.  The chart below shows the places with the highest and lowest costs of living.

 

via MoveHub.

 

The CPI in the infographic is a relative indicator of a country's living costs compared to New York. So, for instance, if a country has a CPI of 70, on average it enjoys 30% cheaper living costs compared to New York.